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7 Mar 2003 : Column 1059continued
The Financial Secretary can crush this Bill in a trice by sheer force of numbers with the votes of her loyal and ambitious supporters, although I trust that she would not do so without at least considering the arguments, many of which she may have heard before.
Mr. Waterson: First, may I say how much I support this Bill, not least as co-chairman of the all-party group on ageing and older people? Will my hon. and learned Friend tackle head-on, later in his remarks the only half-decent argument that the Treasury ever put forward on the series of similar measures: the worry that it purports to have about people falling back on the public purse if they are allowed, in effect, to dissipate their pension funds through relaxation of the rules on annuities?
My hunch is that the Financial Secretary has much regard for the thrust of this Bill, not least because it is gender-neutral and recognises that the gap in life expectancy at 60, 65 and 70 nowadays is not so much between the sexes but between the different regions of the country. In 1970, a woman of 60 could expect to live six years longer than her male counterpart. By 2000, the gap was down to two years. Male life expectancy for a 60-year-old has been improving by three years every decade, and for a 60-year-old woman by two years. That suggests that before very long the idea of a unisex annuity rate may have little or no impact on either sex: it may also suggest that, with the increase in numbers of women working over that age, work is bad for their health, but I will not pursue that further. Men and women in Manchester have, according to a recent Office for National Statistics survey, the lowest expectation of life, whereas men in north Dorset and women in west Somerset have the longest expectation of life. There must be room for a sophisticated dating agency in the south-west.
The Financial Secretary represents a constituency that is by no means at the top of the income pile, and must realise that a measure such as this will do something, if by no means everything, towards solving the pensions crisis. I accept that the Secretary of State made a statement to the House at the time of the publication of the Green Paper charmingly entitled "Simplicity, security and choice: Working and saving for retirement" on 17 December, and that there are indications that the Government are moving slowly towards some type of annuity reform. But it is far from clear what their real intentions are, how developed their thinking is and when, if at all, we will see a Government Bill to deal with the glaring problems that currently exist and that will only get worse if things are allowed to carry on as at present. The Government have promised reform previously, but nothing has come from that.
Pensions draw-down, to which the Government appear to have attached some importance, is not the only answer, since it is available in real terms only to those with very large pension pots, and in any event pensions advisers and consultants may start to take regional differences into account when recommending either an annuity or draw-down. It might be good advice to offer Mancunians draw-down and those in the south-west annuities: perhaps not my most serious point but
Let me now turn briefly to the provisions in the Bill. I accept that it is not a candidate for Radio 4's "Book at Bedtime" or even, if I look across at the Financial Secretary, "Listen with Mother", but perhaps that was well before her day. I do not want us to get stuck in a quagmire of interlocking sections and subsections, so I will not attempt to unravel the relationship between this Bill and the Income and Corporation Taxes Act 1988 more precisely than to say that clause 1 sets out the required amendments to the 1988 Act to end the current system that allows people to choose when to annuitise and what type of annuity can be acquired. It amends the sections of the Act relating to the purchase of annuities from a personal pension fund.
Needless to say, public interest in the part played by annuities in private pension schemes has grown considerably in the last few years because of the declining rates offered by annuity providers, mostly insurance companies, as a consequence of lower long-term interest rates and increased life expectancy. To give just one example provided by the Annuity Bureau, in 1990 a fund of £100,000 would have bought an annuity producing annual income of around £10,000. Now, it would produce only £4,500.
Ms Meg Munn (Sheffield, Heeley): I have been following what the hon. and learned Gentleman has been saying, and, in the absence of explanatory notes, I have relied on information from the House of Commons Library. I am bit confused by what is being said, because the information from the Library states:
Mr. Garnier: I have a suspicion, which may be unworthy, that the hon. Lady has read neither the Bill[Interruption.] Yes, I can see that she has a copy of the Bill; nor do I believe that she has read from start to finish the very useful House of Commons Library brief. I suggest that she does so. In any event, if she wants further tuition, now is not the time to receive the kind of detailed information on the Bill that she might like. I will happily see her afterwards if she wants further assistance. Equally, if she volunteers to serve on the Committee, I shall be happy to see her there. I trust that, in due course, she will allow the Bill to proceed to Committee.
Mr. Garnier: Some will say that steady economic indicators mean that falls in annuity rates are not as significant as they might appear to be, but my constituents' pensions are increasing less steeply than their council tax bills and their other day-to-day living costs. Although the immediate future may bring low inflation, they do not feel secure that their pensions will carry them through increased local and Treasury tax
It is now compulsory for at least 75 per cent. of a money purchase pension fund to be used to buy an annuity by the age of 75. I and those who agree with me want that rule to go so as to allow pensioners the freedom to choose the method of funding their retirement that best suits their particular circumstances, so long as they maintain a minimum retirement income above the level of income support to prevent them from becoming a burden on the state.
Clause 2 would give the Chancellor the power to set the level of the minimum retirement income annually. It would be secured through an increasing annuity. I accept that further work needs to be done on the sensible level at which to set the MRI each year, especially if the Government's state pension credit, which starts next October, produces a complication. However, as a matter of principle, I am of the opinion that the concept can work to the advantage of both the pensioner and the taxpayer.
Tensions surely exist between family-based and individually based welfare benefits and single pensioner households, and married pensioner households. However, the issues are there to be discussed, and they should be creative, not destructive, tensions. They can be that if imagination and good will on the part of the Government is brought to bear.
Individuals with a pension pot in excess of that needed to meet the MRI would be able to invest their additional savings in a retirement income fund and there would be no restrictions on when and how much income could be withdrawn. The Bill would also require the MRI annuity to be gender neutral and would abolish the provisions relating to income draw-downthe main alternative to annuities at presentas the Bill's arrangements for the MRI and the retirement income fund would give individuals both security for a given level of income and freedom to invest and draw from the remaining fund. The RIF, as defined under Clause 1(7), would allow for withdrawals to be classed and taxed as income, albeit that the investment growth would be protected from tax as part of an approved pension scheme.
Mr. Michael Howard (Folkestone and Hythe): On a point of order, Mr. Deputy Speaker. You will be aware that today's Order Paper contains notice of a written ministerial statement to be made by the Chancellor of the Exchequer. That statement has now been made, and it discloses that the Finance Bill will be published on Wednesday 16 April, which will be in the middle of the Easter recess. Can you give the House any guidance as to whether there is a precedent for publishing the Finance Bill during a recess? Is it not absolutely clear that that will be materially inconvenient for Members in